401(k) Boost by 23.5%

NEW YORK (MainStreet) — While investors may not like the unknown, a new study shows maintaining a solid positive direction through even the most difficult of financial times can have significant payoffs for those planning their retirement.

The average 401(k) participant who stuck to saving consistently saw his account balances rise by an average 23.5% from 2007 through 2011, according to a joint study by the nonpartisan groups Investment Company Institute and Employee Benefit Research Institute.

Those who consistently contributed saw an average $28,000 increase in their plan, from an average of about $76,500 at the end of 2007 to more than $94,000 at the end of 2011, the institutes found. That was despite the sharp decline caused when the market tanked in 2008.

"The data confirm that, even through tough economic times, the discipline of 401(k) plans—staying the course by investing and continuing contributions — served savers well," said Paul Schott Stevens, ICI president and CEO. "Dollar-cost averaging and putting away money paycheck by paycheck have made a big difference in the bottom line for these savers."

That's not to say it's always easy.

The hit stock prices took during 2008 decreased participants' overall average balance by 34.8% from 2007 to 2008.

Nevertheless, overall average account growth after the end of 2008 to 2011 overcame that decline if participants kept contributing to their plan and didn't retreat.

"Analysis of a consistent group of 2007 to 2011 401(k) participants highlights the impact of consistent participation in 401(k) plans," said Dallas Salisbury, EBRI president and CEO. "At year-end 2011, the average account balance among consistent participants was 60 percent higher than the average account balance among all participants in the EBRI/ICI 401(k) database, and the consistent group's median balance was about two and a half times the median balance across all participants at year-end 2011."